Starting your own business and becoming your own boss sounds tempting, but believe me when I say that it is not everyone’s cup of tea, nor is it a piece of cake. Many things are easier said than done – transitioning to a startup entrepreneur is among the top contenders on that list. If you have decided to launch your very own startup, you should understand that proper financial management is the key to your survival. When there is no money, there is no business. Most startups fail within the first year because they exhaust all their funds and accumulate heaps of debt. In some cases, filing Chapter 11 or Chapter 7 bankruptcy helps overcome the financial deficit, but let us hope you never have to go there.
These financial management tips are targeted towards sustaining and growing your startup:
1. Monitor your Cash Flow
If you don’t keep track of where every dollar is coming from and where it goes, running the business will become impossible. A startup that is oblivious to its income and spending is destined to fail. If the math is too complicated to figure out on your own, use a simple accounting software or hire a freelancer to do it for you. You may appoint a fulltime bookkeeper when business expands and you have more than ten employees working for you. Monitor your company’s ROI (return of investment) to determine if it is profitable and to what extent. A negative ROI indicates that you are spending more than you earn, thus continuing operations would not be feasible.
2. Limit your Expenses
At the beginning, refrain from spending lavishly because startup entrepreneurs stand on thin ice. You don’t need the fanciest office in the heart of the city or topnotch amenities while your company is a mere seedling. During the initial stages, you need to focus on the quality of your product or service alone. Invest the bare minimum to stay in the running, whilst offering something your competition lacks.
3. Create a Budget
Once you have a firm hold on your monthly revenue and understand all your financial obligations (taxes, insurance fees, maintenance costs, etc.), you possess the information for creating a practical budget. The money you have left after paying your standard monthly expenses can be utilized for business expansion. If you operate without referring to a fixed budget, you are likely to overspend and accumulate debt.
4. Value Time
Every moment spent not being productive is a loss to your startup. When you run your own business, time is money, so you better make the best of it. Startups cannot be managed on the go and decisions affecting your business should not be made in a hurry. You need to come up with elaborate plans, and you have to contemplate every move in order to guarantee success. Never stop strategizing, welcoming inspiration, and being innovative.
5. Prioritize Procurement of Customers/Clients
If there are no people purchasing your products or services, your business is doomed. You have to secure customers/clients in order to make money and keep your startup alive. Therefore, marketing is something you need to invest in during initial stages. Moreover, you have to fulfill consumer expectations by actually delivering what you promise and advertise. Hire qualified personnel for your customer support team, and provide round the clock service for international clients.
6. Maintain a good Credit Score
As your business gains recognition, you will strive to balance the demand and supply chain. You will probably need to expand by acquiring more real estate, purchasing new equipment, and hiring more workers. Your company might need multiple loans to accommodate business growth. Loans can be scary, but they are necessary and manageable, as long as you are not subject to high interest rates. Timely payment of loan installments is the key to maintaining a good credit score and qualifying for the best interest rates.
7. Get Insured
Your business may be small and new, but that does not grant you automatic immunity against legal claims and lawsuits. Many small businesses collapse when they are unexpectedly sued by a customer or employee because they are not financially equipped to shoulder the cost of damages. If you have the appropriate insurance policies for your business, you will never be pushed to the verge of going broke in the event of unanticipated expenses. Worker’s compensation insurance is mandatory for all employers in most states. Getting insured on all fronts will cast a safety net over your startup.
8. Prepare for the worst case scenario
There is no harm in maintaining an optimistic attitude, but you must have a backup plan in case things don’t work out as premeditated. Sometimes, bad situations arise even when you are being as careful as possible. The life of a startup entrepreneur is similar to a rollercoaster ride, so be prepared for the highs and lows. Securing personal and business emergency funds will protect you during unsuspected rainy days. Keep your personal assets separate from your business, so that creditors cannot attack them in the event of business litigation or bankruptcy.
9. Establish Realistic Goals
It is not uncommon to think big when your startup is barely an idea or thought. Do not get ahead of yourself to be crushed by disappointments later on. Take one step at a time and understand that dreams cannot be built overnight. Start by establishing practical day to day goals, and gradually approach a realistic five year plan after you apprehend your startup’s capacity and potential. Do not compare yourself with competitors who have been operating for several years. Do not rush business growth and development – let it happen naturally and organically.
10. Educate Yourself
If you want to own a lucrative business, you will need to keep learning from your experience and mistakes. A business degree or diploma alone is not enough to guarantee your success. Keep an eye on market trends, as well as what your competitors are doing. Learning about local business laws will also keep you one step ahead and out of legal problems. Know the risks of all your ventures and always make informed decisions. Increase your participation and involvement in the business instead of depending on staff.
John Adams writes about Social Media Marketing As An Efficient web optimization Device. He encourages his readers to enhance their high quality of life by incorporating optimistic and good issues. As he likes to share his perception about life experiences, he has contribute on varied on-line platform in the identical area of interest.